TI buys former SMIC fab in Chengdu

SAN FRANCISCO—Texas Instruments Inc. Thursday (Oct. 14) announced its first wafer fab in China, a fully-equipped 200-mm facility in the Chengdu High-tech Zone that TI purchased from Cension Semiconductor Manufacturing Co. Financial terms of the deal were not disclosed.

The Chengdu fab was previously operated by Semiconductor Manufacturing International Corp. (SMIC). EE Timesreported last month that SMIC was in talks with TI about taking over the fab. Reports had been circulating that SMIC wanted TI to take over the fab since early this year.

TI (Dallas) has hired about 700 former SMIC and Cension employees that worked at the site and will begin production of analog ICs immediately, said Gregg Lowe, TI senior vice president for analog. TI initially begins to produce power management ICs at the site and will eventually ramp production of other analog parts, Lowe said.

In addition to the 120,000-square- foot fully equipped facility, the acquisition also includes a second 134,000-sqaure foot fab "shell," which TI will equip and ramp for production when the firm determines that more capacity is needed, Lowe said.

The acquisition marks the third major expansion of analog production capacity for TI this year. In July, TI announced it acquired two fabs from Spansion Japan Ltd., the former Japanese subsidiary of Spansion Inc. Last year, TI began ramping its RFAB facility in Richardson, Texas, using 300-mm production equipment purchased from bankrupt memory supplier Qimonda AG. Lowe said that facility has recently been qualified and is now in production.

The new Chengdu fab will increase TI's production capability by $1 billion per year, Lowe said. In total, capacity expansion by TI this year will increase the company's total production capacity from $6.5 billion to $11 billion, he said. Lowe said he is unaware of a single other analog chip supplier that has opened a new fab or made significant investment in expanding an existing facility this year.

Earlier this year, TI and other analog vendors were criticized for long lead times for part delivery. Some said the dramatic semiconductor industry rebound appeared to catch analog vendors unprepared and without sufficient capacity to meet demand.

Lowe said Thursday that the Chengdu fab and other TI capacity expansions send "a really nice signal to our customers. They want to make sure we've got the capacity in place for them."

Lowe, citing statistics provided by Semiconductor International Capacity Statistics, said total fab capacity in the semiconductor industry still remains more than 10 percent below its peak in the third quarter of 2008, after which the market drop caused many companies to close older facilities and reduce production capacity.

TI already had an existing relationship with the Chengdu fab, Lowe said. SMIC made some products for TI there on a foundry basis, he said. While the facility is TI's first fab in China, the company has been involved in the electronics industry in China with sales, support and design activities, he said.

TI's new fab in the Chengdu High-tech Zone was previously operated by SMIC.

There are many factors at play in TI's capacity expansion spree, according to Lowe. He tied it to TI's corporate strategy of expanding to grow its analog business faster than the overall market, the availability of relatively inexpensive fabs and production equipment, and the strength of TI's balance sheet.

"I think those three things really put us in a great position," Lowe said. "This is really decisions we are making that will give us strength for years and years if not decades to come."

SMIC set up Cension in 2005. The arrangement called for SMIC to manage the plant on behalf of Cension, which was backed by investors and the Chengdu government. But the fab had been losing money for some time, prompting SMIC to seek a buyer.

This is in accordance with TI's philosophy i.e to keep the Analog fabs. TI sold of its ASIC unit couple of years back and decided to concentrate on Analog portion. It might be recalled they bought fab in richardson this year. So far so good for TI. Best of luck.